Share market basics
The maximum percentage a stock or index can move in a session before the exchange halts trading or stops accepting orders beyond that price.
A circuit limit, or price band, is the most a stock or index is allowed to move in one session. Exchanges set stock-level bands, commonly 2%, 5%, 10% or 20% either way depending on the stock, while stocks in the F&O segment work differently with dynamic bands. When a stock hits its upper circuit, no sell orders remain and buyers queue up unable to buy; at the lower circuit, sellers cannot find buyers. Index-level circuit breakers halt the entire market if Nifty or Sensex falls 10%, 15% or 20%, as happened in March 2020. Circuits exist to slow down panic and manipulation. For a trader, the danger is being stuck: if you hold a small-cap that hits lower circuit for several days, you may be unable to exit. Check the price band on the exchange website before trading an unfamiliar stock.
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